National Recovery On Right Trajectory

Bank Negara Governor’s announcement on the 16.1 percent year-on-year growth in Gross Domestic Product for the second quarter of 2021 indicates a continued recovery trajectory.

The growth comes of the back of a smaller contraction of 0.5 per cent in the preceding quarter and a decline of 3.4 percent during the fourth quarter of 2020.

According to Finance Minister Tengku Zafrul, based on a six-month perspective, GDP rose by 7.1 percent, relative to a contraction of 8.4 per cent during the same period in 2020.

The minister said in terms of monthly GDP performance, growth in April and May 2021 recovered strongly at 40.1 per cent and 19.8 per cent, respectively, due to the low base effect during the same months in 2020.

This can be attributed to the various support mechanism instituted, the implementation of stimulus and assistance packages throughout the period, namely PERMAI, PEMERKASA and PEMERKASA Plus valued at a total of RM75 billion, and complemented by ongoing measures under Budget 2021.

Tengku Zafrul noted that GDP growth in June declined by 4.4 per cent due to the impact of the latest Movement Control Order beginning mid-May, as well as Phase 1 of the National Recovery Plan in early June.

However, relative to MCO 1.0 last year, the decline in June 2021 was smaller compared to April 2020 (-28.8 per cent).

Although challenges continue to appear, like the Delta variant and case spikes, various key economic indicators reflected encouraging signs of recovery. Data released by the Department of Statistics, showed a 1.4 percent increase of the Industrial Production Index in June 2021 and the 6.5 per cent growth in the manufacturing sector’s sales value for the same month to RM124.4 billion.

In addition, the services sector’s revenue rose 20.5 per cent to RM404.5 billion in Q2 2021 with each segment within the sector showing signs of recovery while income in e-commerce jumped by 23.3 per cent to RM267.6 billion as e-commerce transactions grew in the manufacturing and services sectors.

Another indicator was the capital markets, the FTSE Bursa Malaysia KLCI increased by 2.1 per cent in Q2 2021, supported by retail investors’ participation with a total net investment of RM9.4 billion year-to-date. Foreign investors also remained confident in the ringgit bond market. For the first half of 2021, RM24.5 billion of net inflows were recorded, with approximately 60 per cent subscribed to the Malaysian Government Securities.

Gradual reopening of states that are transitioning into Phase 2 and 3 is proving to add to the economic recovery, as the National COVID-19 Immunisation Programme picks up the National Recovery Plan will only start meeting its goals.

To date, 70 per cent of Malaysia’s adult population have received their first dose of vaccination. At the current rate, it is expected that 80 per cent of the adult population in the Klang Valley, and 50 per cent of the nation’s adult population, will be fully vaccinated by end-August.

Bank Negara Malaysia, in announcing the 16.1 per cent economic growth was mainly supported by the improvement in domestic demand. This was against the -17.1 per cent GDP growth recorded in the same period a year ago, as the economy took the brunt of the lockdown measures.

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